Articles

Faster Payments Take Center Stage at AFP Annual Conference

By Andrew Deichler

Published: 10/23/2016

ORLANDO, Fla. -- Sunday afternoon at the 2016 AFP Annual Conference, faster payments was the primary topic of discussion at the Payments Roundtable, sponsored by Comdata. Representatives from different industry groups provided updates on their current faster payments initiatives.

Magnus Carlsson, AFP’s manager of treasury and payments, began by discussing the results of the AFP Electronic Payments Survey. Fully 62 percent of the corporate treasury and finance professionals who responded to the survey agreed that speeding up payment methods will have a positive impact. Going a bit more in depth, 94 percent of respondents said that smart, faster payments that carry extended remittance information are important, with 45 percent agreeing that it is very important.

Same-day ACH

Given that same-day ACH is now live, it was no surprise that Michael Herd, senior managing director, ACH Network Rules and Enforcement for NACHA, was the first to provide an update. Although the same-day ACH only went live last month, NACHA is already seeing strong adoption and implementation has been going smoothly. “I don’t have any hard numbers now, but the volume that we’ve seen has been reasonable substantial for an offering like this,” he said. “It’s not a trivial number; we’ve had some substantial numbers.”

ACH operators have established two daily schedules for clearing same-day ACH transactions and providing interbank settlement. NACHA has also observed early adopters using the service for payroll payments, including emergency payroll; business-to-consumer disbursements, such as pension and insurance payments; B2B payments; consumer bill payments and P2P payments.

The next phase of the project will be incorporating same-day ACH debits, which become available on Sept. 15, 2017. “I think a lot of corporates are excited about [same-day ACH debits]; a lot of consumer bill payments are through ACH debit,” Herd said.

Fed Faster Payments Task Force

Next up was Sean Rodriguez, senior vice president and faster payments strategy leader for the Federal Reserve System, provided and update on the Fed's faster payments initiative. After gathering multiple end-to-end solution proposals, the Fed employed McKinsey & Co. to do an independent assessment.

“This is phase two we’re in right now; we’re assessing these proposals,” Rodriguez said. “McKinsey has released the proposals and the assessments to the [Fed Faster Payments Task Force]. We’re going to spend the next three months looking at these proposals within the task force, providing commentary to the proposers about what the task force members think about them. Our objective isn’t to pick a winner; the objective is to try and enhance the proposals.”

Once that work is completed, the Fed can move into the third and final phase of the project, in which it will publish the assessment results. “We’re going to publish a report on what we recommend as the next steps,” Rodriguez said. While he acknowledged that he doesn’t expect all the kinks to be worked out by next year, he envisions having four or five work streams that continue that drive towards faster payments in the U.S.

Real-Time Payments

James Colassano, senior vice president of product development for The Clearing House, provide an in-depth look at his organization's faster payments project, the Real-Time Payments (RTP) system. He began by noting that despite all of the innovations in payments over the past several decades, a new payment rail has yet to actually be created. The RTP aims to change that.

“What in the process of building a new payment rail; it doesn’t operate on top of any other payment rails,” he said. “But since we’re going through the process of building a new payments infrastructure, we’re trying to take into consideration all those aspects of payments over the last 40 years that haven’t been very effective.”

According to Colassano, RTP will not only clear and settle payments in seconds, but it will provide end-to-end visibility. It will work in the evenings and on weekends and holidays. Perhaps most interesting for treasurers is that messaging will move in real-time, along with the payment. “It is a true, end-to-end, real-time payment experience,” he said. “It will clear and settle and both parties will be notified in just a few seconds that the transaction has been executed.”

TCH expects the system to be operational in the first half of next year. There will be an initial $25,000 limit on sending transactions, however, TCH expects to ramp up that dollar amount to $100,000 within a year.

Global Payments Innovation

Stacy Rosenthal, senior business manager for SWIFT, provided an update on the Global Payments Innovation (GPI) initiative, which is intended to make cross-border payments faster and more secure. Unlike the RTP, SWIFT’s system runs on existing payment rails.

As noted at the Sibos conference in Geneva last month, there are several key features of the initiative: same-day availability of funds, a transparent and predictable fee structure, end-to-end payments tracking and enhanced remittance information.

According to Rosenthal, SWIFT has been running a pilot test with 21 banks, and some of them have tested it with their corporate customers. “They’ve taken in a payment transaction, done the cross-border process with these new rules of the road, and sent back the additional information to their corporates,” she said. “It’s still early days; banks are going to have different timelines to launch this initiative. Some are going live in 2017. We’re up to almost 90 banks, making up over 75 percent of the SWIFT business-to-business cross-border traffic.”

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